Wednesday, December 07, 2016

UC - employee v. independent contractor

Farinhas Logistics v. UCBR – Commonwealth Court – December 5, 2016 – *unreported memorandum decision


The above case, though unreported, contains the following extended exposition of the issue of employee v. independent contractor

Employment Relationship
To be eligible for unemployment benefits, a claimant must show that his wages were earned from employment. 43 P.S. §§801(a), 753(x).9 Further, section 402(h) of the Law provides that an employee is ineligible for compensation for any week in which he is engaged in self-employment. 43 P.S. §802(h). Although “self-employment” is not defined, we examine the parties’ working relationship under section 4(l)(2)(B) of the Law,10 the purpose of which is to exclude independent contractors from coverage. Beacon Flag Car Company, Inc. (Doris Weyant) v. Unemployment Compensation Board of Review, 910 A.2d 103, 107 (Pa. Cmwlth. 2006).

To show that a claimant is a self-employed independent contractor, the employer must satisfy the two-pronged test set forth in section 4(l)(2)(B), which states, in pertinent part:

Services performed by an individual for wages shall be deemed to be employment subject to this act, unless and until it is shown to the satisfaction of the department that—(a) such individual has been and will continue to be free from control or direction over the performance of such services both under his contract of service and in fact; and (b) as to such services such individual is customarily engaged in an independently established trade, occupation, profession or business.
43 P.S. §753(l)(2)(B).

This section creates a strong presumption that an individual rendering services for wages is an employee. Kurbatov v. Department of Labor and Industry, Office of Unemployment Compensation, Tax Services, 29 A.3d 66, 69 (Pa. Cmwlth. 2011). To overcome this presumption, the employer has the burden of demonstrating that the claimant “is not subject to the employer’s control and he is engaged in an independently established trade.” Frimet v. Unemployment Compensation Board of Review, 78 A.3d 21, 25 (Pa. Cmwlth. 2013). Both prongs under section 4(l)(2)(B) must be satisfied for a claimant to be self-employed under the Law; otherwise, the presumption of employment stands. Silver v. Unemployment Compensation Board of Review, 34 A.3d 893, 896 (Pa. Cmwlth. 2011).

In determining the existence of an employer/employee relationship, the court is required to examine the actual relationship of the parties. Hartman v. Unemployment Compensation Board of Review, 39 A.3d 507, 511-12 (Pa. Cmwlth. 2012). We noted that the terminology used by the parties to describe their relationship is not dispositive, id., and even a declaration in a contract stating that the claimant is an independent contractor may not necessarily satisfy the independent contractor test of section 4(l)(2)(B), Clark, 129 A.3d at 1277 n.11. Moreover, although the existence of a non-compete agreement is not determinative of the issue, the terms of the parties’ agreement must be considered. Kurbatov, 29 A.3d at 72.

Two-Prong Test
As noted above, Putative Employer must show that Claimant has been, and will continue to be, free from control or direction over the performance of such services. 43 P.S. §753(l)(2)(B)(a). In analyzing this first prong of the test, we consider the following relevant factors: how the claimant was paid; how taxes on the claimant's earnings were paid; whether the claimant or the person for whom [he] worked supplied tools or equipment necessary to perform the services; whether the person for whom claimant worked provided on-the-job training; whether claimant was required to attend meetings or report on [his] work; who set the time and location of the work; whether the claimant's work was subject to supervision or review; the terms of any written contract between the parties; the degree to which the claimant was directed with respect to the work; and whether the claimant was free to refuse work assignments without repercussions.
Stauffer v. Unemployment Compensation Board of Review, 74 A.3d 398, 405 (Pa. Cmwlth. 2013)  

Importantly, no single factor is controlling and the ultimate conclusion pertaining to control must be based on the totality of the circumstances. Quality Care Options v. Unemployment Compensation Board of Review, 57 A.3d 655, 660 (Pa. Cmwlth. 2012). Further, because each case is fact-specific, all of these factors need not be present to determine the type of relationship that exists. Id. However, “‘[w]hile all of these factors are important indicators, the key element is whether the alleged employer has the right to control the work to be done and the manner in which it was performed’ . . . an employer-employee relationship likely exists not only where the employer actually exercises control, but also where it possesses the right to do so.” Kurbatov, 29 A.3d at 70 (quoting York Newspaper Company v. Unemployment Compensation Board of Review, 635 A.2d 251, 253 (Pa. Cmwlth. 1993)) (alteration in original).

As to the second prong of the test, Putative Employer must demonstrate that “as to such services[,] such individual is customarily engaged in an independently established trade, occupation, profession or business.” 43 P.S. §753(l)(2)(B)(b). To determine whether a claimant is “customarily engaged in an  independently established trade, occupation, profession or business,” we look at whether the claimant was restricted from performing the services for others and whether anything in the nature of the work limits it to a single employer. Stauffer, 74 A.3d at 407. Evidence that a claimant is engaged in an independent business is an absolute prerequisite to a determination of self-employment. Quality Care Options, 57 A.3d at 666. As noted by our Supreme Court, “[a] worker can be considered an independent contractor only if he or she is in business for himself or herself.” Danielle Viktor, Ltd. v. Department of Labor and Industry, 892 A.2d 781, 798 (Pa. 2006).

Therefore, an employer must show that the claimant took positive steps toward establishing an independent business. Buchanan v. Unemployment Compensation Board of Review, 581 A.2d 1005, 1008 (Pa. Cmwlth. 1990). Further, the independent trade established must involve the same type of services that the claimant provided to the employer, Electrolux Corporation v. Commonwealth, Department of Labor and Industry, Bureau of Employer Tax Operations, 705 A.2d 1357 (Pa. Cmwlth. 1998), and the claimant must have performed those services for others, and not just for the employer, Peidong Jia v. Unemployment Compensation Board of Review, 55 A.3d 545, 548 (Pa. Cmwlth. 2012).

We have stressed the importance of an employer to submit evidence to show that claimant is engaged in an independent business. See id. at 549 (holding that without evidence that the claimant established an independent business or performed the same services for others, the employer could not establish the second prong of the test to overcome the statutory presumption of employment); see also Clark, 129 A.3d at 1277 (concluding that the employer failed to satisfy the second prong where there was no evidence that the claimant established a private enterprise or independent business through which he provided services to others).
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*An unreported Commonwealth Court case may not be cited binding precedent but can be cited for its persuasive value.  See 210 Pa. Code § 69.414(b) and Pa. R.A.P.  3716

If the case is old, the link may have become stale and may not work, but you can use the case name, court, and date to find the opinion in another source (e.g., Westlaw, Lexis, Google Scholar)



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